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Electric car tax credits & incentives

Last updated 8/25/2021

On average, the cost of an electric vehicle, whether all-electric (AEV) or plug-in hybrid (PHEV) is higher than that of a conventional gas powered car. However, there are a number of federal & state electric car tax credits and other incentives that can lower the upfront cost so EV drivers can take advantage of fuel savings and reduced emissions.

Federal incentives for electric vehicles

The Qualified Plug-in Electric Drive Motor Vehicle Tax Credit is the main federal incentive program for electric cars available in the United States. Under this program, the purchase of a new electric vehicle is eligibe for a tax credit worth $7,500 as long as it meets the following criteria:

  • Purchased after December 31, 2009
  • Uses a traction battery (as the vast majority of EVs do)
  • Battery has at least 4 kilowatt hours (kWh) of capacity
  • Uses an external plug-in source to recharge
  • Has a vehicle weight rating of up to 14,000 pounds
  • Meets emissions standards

The federal electric car tax credit applies to both all-electric vehicles and plug-in hybrid vehicles, and the actual amount you can claim varies based on car model. Before you decide between electric vehicles, be sure to check out exactly how much your new car gets you in the form of federal electric car tax credits.

This tax credit has a “phase out” built into the program that is dependent on the manufacturer of the car. The phase out will kick in at the beginning of the second calendar quarter after a manufacturer has sold 200,000 eligible AEVs and/or PHEVs. Most electric cars are still eligible for this tax credit. The phase out for this tax credit for vehicles purchased from these manufacturers will not be occurring anytime soon.

Of note, Tesla cars are no longer eligible for the full incentive. Only vehicles delivered by December 31, 3018 received the full credit. Vehicles delivered before June 30, 2019 received a credit of $3,750, those delivered between July 1, 2019 and December 31, 2019 will receive $1,875, and beyond that timeline no credit is available for Tesla.

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State and local electric car tax credits

Aside from federal incentives, there are electric car tax credits and rebates at the state level that you can use to save further on an electric vehicle purchase. This list is of state incentives and does not include utility/private incentives. The Alternative Fuels Data Center also has information on incentives from states, utilities, and private organizations.

State Electric Car Tax Credit Program Description
Alabama None available None available
Alaska None available None available
Arizona Residential Electric Vehicle Supply Equipment (EVSE) Tax Credit  Tax credit of up to $75 for the installation of EVSE in a house or housing unit an individual has built.
Arkansas None available None available
California Plug-In Hybrid and Zero Emission Light-Duty Vehicle Rebates Rebates for the purchase or leasing of AEVs and PHEVs with vehicles purchased before March 28, 2016 eligible for $5,000 in rebates. For vehicles purchased after March 28, 2016, rebates based on gross annual income. 
Alternative Fuel and Advanced Vehicle Rebate (San Joaquin Valley) $3,000 rebates of qualifying electric vehicles for residents and businesses located in the San Joaquin Valley.
Colorado Plug-In Electric Vehicle (PEV) Tax Credit

Credit of $5,000 of purchase or conversion and $2,500 for a lease of light duty EVs or PHEVs.

For light-duty, medium-duty, and heavy-duty electric trucks the credits are $7,000 purchase/$3,500 lease, $10,000 purchase/$5,000 lease, and $20,000 purchase/$10,000 lease, respectively. All of these tax credit amounts will decrease in 2020.

Connecticut Hydrogen and Plug-In Electric Vehicle (PEV) Rebate

Rebates for the purchase or lease of all-electric vehicles and plug-in hybrid electric vehicles. The amounts are based off battery capacity: $3,000 for PHEVs with battery capacity greater than 18kWh, $1,500 for batteries between 10kWh and 18kWh, and $750 for batteries less than 10kWh.

For AEVs, the rebate amounts are the same but the battery cut offs are greater than 25kWh, 20 to 25kWh, and less than 20kWh. In addition, the rebate covers hydrogen fuel cell electric vehicles with a flat rebate of $5,000.

Delaware Alternative Fuel Vehicle (AFV) Rebate Rebates for vehicles purchased between November 1, 2016 and June 30, 2018. AEV purchases receive a rebate of $3,000 and PHEV purchases receive $1,500.  
Electric Vehicle Supply Equipment (EVSE) Rebates Offers rebate amounts for 50% of the cost of a residential charging station and 75% of the cost of commercial and workplace charging stations.
District of Columbia None available None available
Florida None available None available
Georgia Electric Vehicle Supply Equipment (EVSE) Tax Credit Eligible business enterprises receive an income tax credit for the purchase or lease of EVSE when the equipment is in the state and open to the public.
Hawaii None available None available
Idaho None available None available
Illinois Electric Vehicle Supply Equipment (EVSE) Rebates Covers 50% of the cost of equipment and installation of charging equipment with SAE J1772 or CHAdeMo connectors.  This rebate is up to $3,750 per networked single station; $3,000 per non-networked single station along with larger rebates for larger dual and fast charge stations.
Indiana None available None available
Iowa None available None available
Kansas None available None available
Kentucky None available None available
Louisiana None available None available
Maine None available None available
Maryland Electric Vehicle Supply Equipment (EVSE) Rebate Program Offers individuals $700 for the cost of acquiring and installing qualified charging equipment.
Plug-In Electric Vehicle (PEV) Tax Credit As of July 1, 2017 allows purchasers of qualified vehicles to apply for a tax credit of up to $3,000 calculated as $100 per kWh of battery capacity.
Massachusetts Massachusetts Plug-In Electric Vehicle (PEV) Rebates Rebates of up to $2,500 to customers purchasing or leasing a plug-in electric vehicle. The rebate application must be submitted within three months of the customer's purchase or lease date.
Michigan None available None available
Minnesota None available None available
Mississippi None available None available
Missouri None available None available
Montana Alternative Fuel Vehicle (AFV) Conversion Tax Credit Income tax credit of up to 50% for the equipment and labor costs of converting vehicles to alternative fuels including electric. The maximum credit is $500 for vehicles with a gross vehicle weight rating (GVWR) of 10,000 pounds (lbs.) or less and $1,000 for vehicles with a GVWR of more than 10,000 lbs.
Nebraska None available None available
Nevada None available None available
New Hampshire None available None available
New Jersey Zero Emissions Vehicle (ZEV) Tax Exemption Exempts AEVs (not PHEVs) from state sales tax and use tax when these vehicles are sold, rented, or leased in the state.
New Mexico None available None available
New York Plug-In Electric Vehicle (PEV) Rebate Program Rebates of up to $2,000 for the purchase or lease of eligible new plug-in electric vehicles. The amounts vary based on the vehicle's all electric range and suggested retail price.
North Carolina None available None available
North Dakota None available None available
Ohio None available None available
Oklahoma None available None available
Oregon Alternative Fueling Infrastructure Tax Credit Residential tax credit for 25% of alternative fuel infrastructure project costs including electric charging of up to $750 and the credit is available through the end of 2017.
Pennsylvania Alternative Fuel Vehicle (AFV) and Hybrid Electric Vehicle (HEV) Funding Rebates to assist with the incremental cost of the purchase of all-electric vehicles and plug-in hybrid electric vehicles. The rebate amounts are $1,750 for qualified EVs and $1,000 for qualified PHEVs and are available until 250 rebates are disbursed.
Rhode Island Plug-In Electric Vehicle (PEV) Rebates Rebates to state and municipal agencies for the purchase and installation of publicly accessible Level 2 or DC fast chargers. Agencies are eligible for up to $60,000 in incentives for charging stations that are installed and operational on or after July 1, 2016. Agencies that install EVSE also qualify for up to $15,000 to support the purchase or lease of a new PEV acquired on or after July 1, 2016.
South Carolina None available None available
South Dakota None available None available
Tennessee None available None available
Texas Clean Vehicle Replacement Vouchers Provides vehicle replacement assistance for qualified individuals in the amount of $3,500 toward the purchase of a hybrid electric or battery electric vehicles.
Light-Duty Alternative Fuel Vehicle Rebates Program for the purchase or lease of new light-duty vehicle powered by compressed natural gas, propane, hydrogen, or electricity. Electric vehicles powered by a battery or hydrogen fuel cell are eligible for a rebate of $2,500, for the first 2,000 applicants.
Utah Qualified Heavy-Duty Alternative Fuel Vehicle (AFV) Tax Credit Tax credits for heavy duty electric vehicles with $25,000 in credit available in 2017, $20,000 in 2018, $18,000 in 2019, and $15,000 in 2020. At least 50% of the qualified vehicle's miles must be driven in the state and the credit expires at the end of 2020.
Vermont None available None available
Virginia None available ​​​​​​​None available
Washington Alternative Fuel Vehicle (AFV) Tax Exemption Sales tax exemption, applies to up to $32,000 of a vehicle's selling price or the total amount of lease payments made. This exemption expires July 1, 2019.
West Virginia ​​​​​​​None available ​​​​​​​None available
Wisconsin Alternative Fuel Tax Refund for Taxis Allows vehicles that transport passengers to be reimbursed for the paid amount of the Wisconsin state fuel tax. Refund claims must be filed within one year of the fuel purchase date.
Wyoming ​​​​​​​None available ​​​​​​​None available
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Form 8936 instructions: claiming the federal electric vehicle tax credit

In order to claim the federal electric vehicle tax credit once you buy an electric car, you'll need to fill out IRS Form 8936 and report the proper credit from the form on Form 1040 (Individual Income Tax Return). The IRS gives detailed instructions for how to fill out these forms on their website, but we've broken down some of the main points here:

  • Line 1: enter your electric car's year, make, and model
  • Line 2: enter your vehicle's vehicle identification number (VIN)
  • Line 3: enter the date the car was placed in service
  • Line 4a: for two-wheeled vehicles, enter the cost. For vehicles with at least four wheels, enter the credit amount for your vehicle's make and model found on the IRS site
  • Line 4b: enter 100% unless your vehicle was manufacturered by Tesla or GM
    • For Tesla, enter one of the following percentages:
      • 100% if purchased before January 1, 2019
      • 50% if purchased after December 31, 2018 but before July 1, 2019
      • 25% if purchased after September 30, 2019 but before April 1, 2020
    • For GM, enter one of the following percentages
      • 100% if purchased before April 1, 2019
      • 50% if purchased after March 31, 2019 but before October 1, 2019
      • 25% if purchased after September 30, 2019 but before April 1, 2020
  • Line 4c: multiply 4a by 4b

Lines 5 through 14 are only applicable if the electric vehicle is being used at all for business work. We'll skip that part in this overview, but you can find instructions on the IRS site. Lines 15 through 23 are for vehicles used for personal use:

  • Line 15: enter the amount from line 4c if part II was skipped. If part II wasn't skipped, subtract line 6 from line 4c
  • Line 16: leave blank if the vehicle has at least 4 wheels. Vehicles with less than 4 wheels, multiply line 15 by .10
  • Line 17 leave blank if the vehicle has at least 4 wheels. Vehicles with less than 4 wheels, enter $2,500 unless you completed part II. If you completed part II, subtract line 11 from line 10
  • Line 18: for vehicles with 4 or more wheels, enter amount from line 15. For two-wheeled vehicles, enter the smaller number between lines 16 and 17
  • Line 19: add columns (A) and (b) on line 18
  • Line 20: enter the amount from Form 1040 line 11 or Form 1040NR line 45
  • Line 21: personal credits from Form 1040 or 1040NR
  • Line 22: subtract line 21 from line 20
  • Line 23: enter the smaller of line 19 or line 22 on the form and Form 1040 line 54 or Form 1040NR line 51. Check box c on that line and enter "8936" in the space next to the box. If line 22 is smaller than line 19, there are additional instructions.
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